Substitute Senate Bill No. 143
Substitute Senate Bill No. 143
PUBLIC ACT NO. 97-181
AN ACT CONCERNING EQUITY IN CONSTRUCTION
CONTRACTS.
Be it enacted by the Senate and House of
Representatives in General Assembly convened:
Section 1. (NEW) As used in sections 1 to 5,
inclusive, of this act, unless the context
otherwise requires:
(1) "Owner" means any individual, corporation,
partnership, limited partnership, limited
liability company or other business entity that is
the owner of real property upon which a commercial
or mixed-use building is to be or is being
constructed pursuant to a construction contract.
(2) "Completion" means the point in time
during the construction of a commercial or
mixed-use building pursuant to a construction
contract when a certificate of occupancy may
lawfully be issued by a local building official.
(3) "Retainer" means any amount owed by an
owner to a general contractor and held back by the
owner pursuant to the terms of a construction
contract.
(4) "Construction contract" or "contract"
means any contract for the construction of any
commercial or mixed use building, including any
improvements to real property that are associated
with such construction, having a total cost or
estimated cost of two hundred fifty thousand
dollars or more, entered into in this state on or
after the effective date of this act between an
owner and a general contractor, or between a
general contractor and a subcontractor or
subcontractors, or between a subcontractor and any
other subcontractor, but does not include any
public works or other building contract entered
into with the state, the United States, any other
state, and any municipality or other political
subdivision of the state or any other state.
Sec. 2. (NEW) (a) Each construction contract
shall contain the following provisions:
(1) A requirement that any dispute concerning
any payment owed under the contract shall be
submitted to arbitration not later than thirty
days after the date such payment was due under the
contract, unless, before the expiration of such
thirty-day period, such dispute is resolved by the
mutual agreement of the parties or the parties
mutually agree to bring such dispute before a
court of competent jurisdiction. In the absence of
any such mutual agreement, such dispute shall be
submitted to arbitration in accordance with
applicable law and the rules of any dispute
resolution entity agreed upon by the parties,
except that if the parties cannot agree upon a
dispute resolution entity, the applicable rules of
the American Arbitration Association shall apply.
Prior to submitting a dispute to arbitration, the
parties may, by mutual agreement, submit the
dispute to mediation. In the event of mediation,
the rules of the American Arbitration Association
shall apply to such mediation.
(2) A requirement that any arbitration fees
and reasonable attorneys' fees incurred in
connection with any arbitration required by
subdivision (1) of this subsection shall be paid
as directed by the arbitrator or arbitrators.
(3) A requirement or requirements, as
applicable, that (A) the owner shall pay interest
in the amount of ten per cent per year on any
amount awarded by the arbitrator or arbitrators to
the general contractor; (B) the general contractor
shall pay interest in the amount of ten per cent
per year on any amount awarded by the arbitrator
or arbitrators to the subcontractor; or (C) the
subcontractor shall pay interest in the amount of
ten per cent per year on any amount awarded by the
arbitrator or arbitrators to any other
subcontractor. Such interest shall accrue from the
date the amount that is the subject of the
arbitration award was due to be paid under the
contract.
(4) A requirement or requirements, as
applicable, that (A) the general contractor shall
make final payment to the subcontractor, for work
satisfactorily performed under the contract, by a
specific time mutually agreed to by the general
contractor and the subcontractor, but not later
than sixty days after the date on which the
general contractor receives final payment from the
owner; or (B) the subcontractor shall make final
payment to any other subcontractor, for work
satisfactorily performed under the contract, by a
specific time mutually agreed to by the
subcontractor and such other subcontractor, but
not later than sixty days after the date on which
the former subcontractor receives final payment
from the general contractor.
(b) No construction contract may provide for
any retainer (1) in an amount that exceeds five
per cent of the amount owed to the general
contractor by the owner under the contract, and
(2) which is held for a period exceeding sixty
days following completion of all work to be
performed under the contract.
(c) No surety shall be obligated to pay any
fees or interest pursuant to subdivisions (2) and
(3) of subsection (a) of this section.
(d) Either party to a construction contract
arbitration pursuant to subdivision (1) of
subsection (a) of this section may make
application to the superior court for the judicial
district in which one of the parties resides or
has his principal place of business for an order
confirming, vacating, modifying or correcting any
award rendered in such arbitration, in accordance
with the provisions of this subsection and
sections 52-417, 52-418, 52-419 and 52-420 of the
general statutes. A review of such application
shall be confined to the record of the proceedings
before the arbitrator or arbitrators. The court
shall conduct a de novo review of the questions of
law raised in the application. In addition to the
grounds set forth in sections 52-418 and 52-419 of
the general statutes, the court shall consider
questions of fact raised in the application. In
reviewing such questions of fact, the court shall
uphold the award unless it determines that the
factual findings of the arbitrator or arbitrators
are not supported by substantial evidence in the
record and that the substantial rights of the
party making such application have been
prejudiced. If the arbitrator or arbitrators fail
to state findings or reasons for the award, or the
stated findings or reasons are inadequate, the
court shall search the record to determine whether
a basis exists to uphold the award. If the court
determines that the party making such application
has acted without good cause in bringing an appeal
of the award, the court, in its discretion, may
grant costs and reasonable attorney's fees to the
prevailing party.
Sec. 3. (NEW) (a) If any payment required to
be made by an owner to a general contractor in
connection with any construction contract is not
made within fifteen days of a written request for
such payment made by the general contractor to the
owner, which request is made on or after the date
such payment is due under such contract, the
general contractor may cease work and remove all
materials located at the work site that have been
furnished by the general contractor and have not
been utilized, installed or otherwise incorporated
in the project and have not been previously billed
for by the general contractor or paid for by the
owner. In taking such action, the general
contractor shall not be liable for any damages
pursuant to the contract between the general
contractor and the owner for reasons of delay or
failure to comply with any work schedule or
deadlines provided in such contract to the extent
such delay or failure to comply is directly
related to such action. Any general contractor
taking such action shall return all such materials
and resume work within fifteen days of receiving
full payment from the owner of all amounts due to
date under any such contract.
(b) If any payment required to be made by a
general contractor to a subcontractor in
connection with any construction contract is not
made within fifteen days of a written request for
such payment made by the subcontractor to the
general contractor, which request is made on or
after the date such payment is due under such
contract, the subcontractor may cease work and
remove all materials located at the work site that
have been furnished by the subcontractor and have
not been utilized, installed or otherwise
incorporated in the project and have not been
previously billed for by the subcontractor or paid
for by the general contractor. In taking such
action, the subcontractor shall not be liable for
any damages pursuant to the contract between the
subcontractor and the general contractor for
reasons of delay or failure to comply with any
work schedule or deadlines provided in such
contract to the extent such delay or failure to
comply is directly related to such action. Any
subcontractor taking such action shall return all
such materials and resume work within fifteen days
of receiving full payment from the general
contractor of all amounts due to date under any
such contract.
Sec. 4. (NEW) For purposes of sections 1 to 3,
inclusive, and section 6 of this act, any payment
made by an owner directly to a subcontractor of
any amount owed to such subcontractor by a general
contractor under a construction contract between
the subcontractor and the general contractor shall
be deemed to have been paid by the owner to such
general contractor under any construction contract
between the general contractor and the owner,
provided: (1) Such amount shall not exceed the
amount required to be paid to the subcontractor by
the general contractor under the construction
contract between the subcontractor and the general
contractor; (2) such amount was not paid by the
general contractor to the subcontractor within the
time required by the construction contract between
the subcontractor and the general contractor; and
(3) the owner shall provide written notice to the
general contractor that the owner is making such
payment to the subcontractor.
Sec. 5. (NEW) (a) No act or agreement of the
parties to a construction contract nor any
agreement or statement contained in such contract
shall constitute a valid waiver of the provisions
of sections 1 to 4, inclusive, of this act.
(b) If any provision or clause of sections 1
to 5, inclusive, of this act or the application of
such provision or clause to any person or
circumstance is declared to be invalid or
unenforceable by a court of competent
jurisdiction, the remainder of sections 1 to 5,
inclusive, of this act and the application of such
provision or clause to persons or circumstances
other than those to which it is held invalid or
unenforceable shall not be affected, and to this
end the provisions of sections 1 to 5, inclusive,
of this act are severable.
Sec. 6. (NEW) Notwithstanding any special act
or local ordinance, no final certificate of
occupancy shall be issued by a local building
official for any commercial or mixed-use building,
for which a building permit is issued on or after
the effective date of this act, if the building
official has received a written notice of dispute
stating that money is owed by an owner or by a
general contractor for work performed in
connection with a construction contract, as
defined in section 1 of this act, and that all or
part of such money owed remains unpaid. The
building official shall issue such final
certificate, if otherwise eligible for issuance,
upon receipt of: (1) Written notice signed by the
parties to the dispute stating that an amount
equal to the amount claimed by the party owed has
been placed in an interest-bearing escrow account
in a bank in this state by the party obligated to
pay; (2) a copy of a court order or decision
concerning the dispute; (3) written notice signed
by the parties to the dispute stating that the
dispute has been submitted to arbitration in
accordance with subdivision (1) of subsection (a)
of section 2 of this act; (4) an affidavit signed
by one of the parties to the dispute certifying
under penalties of perjury that the dispute has
been submitted to arbitration in accordance with
subdivision (1) of subsection (a) of section 2 of
this act; (5) written notice signed by the parties
to the dispute agreeing that the certificate
should issue notwithstanding the dispute; or (6)
if the owner is a public service company, as
defined in section 16-1 of the general statutes,
or a subsidiary or affiliate of a public service
company, certification from the Secretary of the
State pursuant to section 16-230 of the general
statutes that the paid-in capital and surplus of
such public service company is not less than five
hundred thousand dollars. Nothing in this section
shall be construed to impose any liability on any
municipality or any building official as a result
of any action taken or not taken under this
section or to prohibit the issuance of any
temporary certificate of occupancy allowed by law.
Sec. 7. Section 49-34 of the general statutes
is repealed and the following is substituted in
lieu thereof:
A mechanic's lien is not valid, unless the
person performing the services or furnishing the
materials, (1) within [ninety] ONE HUNDRED TWENTY
days after he has ceased to do so, lodges with the
town clerk of the town in which the building, lot
or plot of land is situated a certificate in
writing, which shall be recorded by the town clerk
with deeds of land, (A) describing the premises,
the amount claimed as a lien thereon, the name or
names of the person against whom the lien is being
filed and the date of the commencement of the
performance of services or furnishing of
materials, (B) stating that the amount claimed is
justly due, as nearly as the same can be
ascertained, and (C) subscribed and sworn to by
the claimant, and (2) within the same time, or
prior to the lodging of the certificate but not
later than thirty days after lodging the
certificate, serves a true and attested copy of
the certificate upon the owner of the building,
lot or plot of land in the same manner as is
provided for the service of the notice in section
49-35.
Vetoed June 26, 1997